Monthly Archives: February 2009

We’re playing in the sandbox!

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I’ve been stumped. With all of the feedback I’m getting on this blog, I cannot determine why it’s not getting better traffic from search engines.

I was researching what I could have done wrong. I got the SEO book from the library, and the learned about links and affiliates. Turns out, there is something called the “sandbox effect” for new web sites that keeps their page rank low. Go figure.

Here’s some interesting information about the “Google Sandbox.”

Looks like we’ve got a few more months to play in the sand before the traffic starts up. Please pass on all of your comments, suggestions and ideas for improvement.

All the best,
Jessica

Our five FREE steps to financial Freedom

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I’ve been trying to make the best of the permanent layoff that came my way in early December. I started a business, I’m also writing and blogging. Without commute time I find myself with a lot of free time. I’m definitely enjoying the flexible lifestyle.

One of the things I’ve decided to tackle is households’ financial situation. This was especially critical now in the face of my less-than-reliable income and a new business startup. As an “under-30” family of four, we have some debt. A couple of college educations, a mortgage, two adoptions that zapped our finances but filled our hearts. We were not in financial peril, but we sure could have been uncomfortable if we had not been paying attention when the layoff hit.

The surprise in this project was how we were able to cut our household expenditures by one-third without really trying (or even noticing, for that matter).

Armed with this new information (and cash as a result!), we rushed forth and started getting out of debt. Using only free resources from the Web and strict budgeting, we’ve paid off two of three credit cards, one adoption loan and all of the college loan. Woot! Not bad for three months, huh?

Recognizing that not everyone was so lucky as I to be laid off, I thought I’d share some time-saving and free tips to financial freedom. No scams, no catches, no hidden spam-engine. And you don’t have to download my free e-book. I don’t even have one.

Have fun, save money, spend less, retire early, and get out of debt. It’s working for us. Unless you email me, you’ll never even hear from me again. (Unless we’re friends or family of course). For the sake of easy reading, I’m breaking this into several posts. Follow the hyperlinks for a free and easy journey to financial freedom.

But please do me one favor. If you like this list, please pass it on.

Now, my family’s first five free steps to financial freedom.
1. Expense tracking
2. Budgeting/Cost cutting
3. Saving
4. Alternative Investements
5. Paying down debt (fast!)

Step 1 of 5: Expense Tracking

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Ok, I know, nobody likes to do it, and you really can’t do anything about your expenses until you know what they are. How did I finally conquer this dragon? I signed up for Mint.com. It’s a free, online banking aggregator (i.e. dashboard) for your money. It downloaded 90 days worth of transactions on all of my bank accounts and put them in one place. Egads! $115.85 spent in 90 days on my cat? Are you kidding me? You can see my earlier post about Mint here and how it works, but I’m telling you, this may have saved this family’s bacon! While we consider ourselves to be fairly frugal people, what we learned is that we simply aren’t extravagant… but we’re definitely aren’t frugal. At least we weren’t. Mint doesn’t keep your personal info, it is just shown to you through their site, so don’t fret, they won’t Twitter your Visa balance.

Bottom line: The thing I love about Mint.com is that I didn’t have to track my expenses for a month and loose four weeks of time. It took a retrospective look at what we’ve spent in the past few months and categorized it, saving time and allowing me to start slashing our expenses while I had the gumption. Result? A viable household budget on our new income in hours, not weeks.

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Part 2 of 5: Budgeting and cost-cutting.

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Don’t move to this step until you’ve completed step one. I mean it. Scroll back and download your transactions you lazy Mary! Just put your grown-up panties on and face it! Now, use Mint.com’s cool features to compare what you’re’ spending to others in your area (bottom half of the trends page). This is how I learned where my family was out of line.

I pulled out our bills for the past month and put the fixed ones in there. And I started from there. I also set up text message alerts for each time we went over budget. Yikes! Talk about accountability. My cell phone started blowing up–harassing me for a stop at Starbucks. But I saved more than $100 a month this way (I don’t want to confess to exactly *how* much more).

Some specific places to cut costs:

A. Stick to one grocery trip per week, for real. And re-evaluate your favorite grocery store. It turns out that Winco is about $80/week for our family of four. Safeway or Kroger is closer to $100-$130. Oh, and cook healthier food. It’s cheaper than prepared freezer-box meals and eating out! (Tonight, leftover roast and lentils in the crock pot for dinner. The kids’ favorite—really–and just $3.00).

B. Call every credit card (or any creditor for that matter) and ask for a lower rate, or to move your balance to an introductory rate. Worked wonders for us (learn more here)

C. Our power bill went up 30% since adding our newly-adopted toddler. Why? I think too many lights left on. In the most frequently forgotten rooms (kids’ bathroom and bedroom) I’m unscrewing a light bulb.

D. Cable was $130 a month. We called Comcast and asked for a smaller package. Instead they “rebundled” our same package into another promo package and we have the same internet/phone/cable package now for $100 a month. (Read more here).

E. Coffee: brew it at home. Nuff said? If you want to further slash costs ($16-$30/mo at our house—heavy coffee drinkers) try roasting your own coffee. We buy green coffee beans at the local African grocery for $2.50 a pound. I roast them at home on the stove, and the quality is excellent. If you want directions, email me

F. Shop around for everything. I went out last week for a bike trailer to take my toddler cycling with the family. Looked at four stores. Ended up saving $250.

The bottom line? These changes alone are saving us more than $500 a month, or close to a week of work in my 9-5 job. This is how I can run my own business and still have enough time to blog. Turns out it’s cheaper when you’re paying attention to what’s going on.

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Part 3 of 5: Savings

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Just do it! The only savings I’ve ever really been successful at was my 401K. With a layoff nothing was being automatically withdrawn from my paycheck every week, i.e. nothing getting saved. Why save when you have credit cards to pay? Well, if you get laid off (like me) what will you pay those credit cards with? Your savings! You definitely don’t need the tax or future implications of cashing out your 401K in your 20s!
That said, I knew that to survive future hardship and meet future goals without debt, we needed to save. I learned about SmartyPig. SmartyPig is an online “transaction engine” that allows you to set your goals, and have your funds automatically withdrawn into a savings account. They also offer an excellent interest rate and the FDIC backing of a real-live bank. (And not one of those shrouded in scandal, either).

The bottom line: We’ve set up “SmartyPig” accounts online for two major upcoming expenses. Once my income becomes more regular, we’ll re-start our emergency savings there as well. Dollar for dollar, our savings rate is now higher than ever, despite the reduction in household income.

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Part 4 of 5: Alternative Income Strategies

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Try it Now! Join Lending Club.
This part of my strategy is mildly controversial and not yet totally proven, but it’s working for me and it’s a whole lot of fun. I’m going to encourage you to risk only what you can afford and give it a try. Our 401K, 403Bs and IRAs are tanking. We’ve literally lost 50% of our retirement/savings this past year. Seriously not fun because we have been very diligent during our working careers to save responsibly. I’m too afraid to try the stock market just yet, so when a friend suggested I investigate microloans, I decided to give it a try. First I put $25 on Kiva.org in a five-month loan. No problem, in five months, I get my money back and in the meantime, a nice lady in Central America is starting her clothing shop. No harm, no foul, and my interest-free investment is more secure than under my mattress or in my 401K. Thank you Kiva. But then I wondered if it was possible to make interest on these investments. Turns out, there is. I joined Lending Club and invested $100 into four loans, to prime borrowers only. There’s a risk of default here, but I invested only in prime borrowers, and only $25 in each, so there’s a pretty good chance I’ll get paid back at least most of what I leant. Also, Lending Club has a reputation for really chasing down those who owe money. Most forms of microlending have very low default rates though and as I’ve learned more about these while blogging at Prosper Lending I’ve decided to go ahead and keep investing. So far, I’m making money every day on my “microinvestment” of $100. This month, I’ve made $.60, and I have monthly payments of $3.33 owed to me tomorrow. Not bad for doing nothing. It’s like being a landlord with less commitment and no midnight maintenance calls. If you’ve got a little cash you’d like to invest (or if you need to consolidate a higher interest loan into something lower-interest) you might want to give peer-to-peer lending a try as either a borrower or investor. I love how interactive it is—I got to choose who I was investing in. Other options include Microplace (international investing) and PertuityDirect (a mutual-fund version of peer-to-peer lending).

The bottom line: diversity in your investments is good right? I’m helping someone and earning 10.89% interest right now. Not too shabby.

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Part 5 of 5: Paying Down Debt.

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I put the cards through the shredder. Every one of them. I’m hanging onto the chips for an art project. Mobile, mosaic, jewelry, I’m not sure yet, but the inspiration will come. Just do it. If you have to have one for emergencies, put it in a Ziploc bag full of water in the freezer. You won’t be able to thaw it quickly or the card will be damaged. Get out all of your statements and use a debt calculator to figure out how to get out. We were paying highest interest accounts first for a long time, but not seeing a big difference. Recently we switched to the snowball effect and WOW is that satisfying. We outright paid off some smaller loans in full (with cash, not credit) and that feels good. Now we have that extra $100 or $200 a month to payoff some bigger balances. We’re also getting aggressive about using any idle money we can, right down to change buckets, and checking the sofa cushions. Found $33 this way last month! Is your mortgage interest rate high? You might want to shop around—rates are way down. Take a look at Smarthippo.com. I’m thinking about doing this but haven’t taken the plunge yet as we think we may sell our condo for something bigger.

The bottom line: to creditors any paying is good paying right now. Try to get them to drop your interest rates, and pay as much as you can every single month. I sit down to write the check every month and challenge myself to pay 10% more than I had planned. Every rebate check or babysitting dollar you get, throw it at those debts. I’ll bet the credit card companies hate me. Every time I deposit anything “extra” to my bank account, I write a check back to the credit card company for the same amount. They get a half dozen checks in the mail every month.

You’ll be surprised at how fast it goes down, especially if you have your net worth on Mint. If you check your Mint.com page every day, your fingers are on the pulse of your finances and you feel compelled to tackle those debts. I sure have and it’s working great for us. We’ve turned around our finances so much that we’ve moved our expected debt free date up by more than 18 months.

Good luck—and please, let me know how it works for you!

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Be Debt-Free Calculators

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Try it Now! Join Lending Club.
The average American household has about $9,200 in credit card debt. I hope you’re in the bottom end of average. I’ve busted more than this already in 2009 (and it’s only February) and I have just slightly more than this left to go before my debt-free goal of July 2009. It’s going to be close but I have faith that we can beat it. What then? I think we’ll go to Disney Land (but not until we’ve saved for it).

CNN Money’s Get Out of Debt calculator:
Enter your debts (they’re optimistic as there’s only five lines but an option to add more). Choose from the following options:
1. Fixed Payments (how long ‘til I’m debt-free?)
2. Minimum payments (how long will it be and how much will I pay?)
3. Debt-free deadline (what do I have to do to be debt free by my desired date?)

This calculator is anonymous and produced by a reliable source (CNN). It is very, very easy to use. Unfortunately, one thing it fails to mention is that this payoff plan will only work if you put those cards through the shredder!

Living on a Dime:
You don’t have to get out all your statements, but you should know what you owe in total and the average interest rate. Plug those in the boxes and you can click “show me the light” which will say how long it will take and what it will cost to be rid of your debt. Another cathartic, though not very useful button is “take it all away” which simply clears the boxes. I realize this is likely so you can re-enter different information and try it again. I put in the same info and “took it all away” several times in lieu of paying a therapist today. I feel better already.

Bankrate.com’s Debt Calculator:

Bankrate.com is a Web site for those shopping for credit cards. If you feel like you’ll be compelled to try… don’t bother, use one of the earlier links. This is a pretty good calculator though. It also shows the interest rates of some other cards. I hope your rates are better than theirs. I know mine are.

What all of these fine organizations fail to do is to remind you to sit down and chop up that card. I’m saving my chopped up card chips for a craft project. Maybe a mobile, or a mosaic or a Christmas Tree ornament. I’m waiting for the inspiration to come to me. (I have strategically tossed some chips from each card in hopes of preventing my relapse into using the cards, but it feels so good to be this close to debt-free that I’ve never felt compelled to use the cards or order replacements.

Another thing that these sites fail to mention is that if you haven’t called in the past three months for a lower rate, you need to do it. Will your card company do a 0% balance transfer from another card? Will they reduce your interest rate for even a short time? I called back in December and got my rates lowered on almost all of my cards. One even told me to call back each month for a lower rate, and would you know, it’s working? My credit card interest rate is now between 5%-8% and it is 0% on one card until August.

Take a look at my post earlier about my results with this technique.

Not having any luck with credit card companies lowering their rates? Many people are using Lending Club to consolidate their credit cards into a single lower-rate loan. I’m an investor (yep, I invest in these kinds of consolidation loans!) with Lending Club, and I’m really happy with the company.

Also, if you’re looking to consolidate, be sure to get rid of those cards so you don’t just start over!


Need Money? Join Lending Club!

Debt-free Happy Dance!

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Called Wells Fargo today and paid off my $2,000 balance on my student loan. One credit card, a HELOC and a mortgage left to go.

So close!! I had planned to be out of debt (except the mortgage) by March, but it may be longer than that due to my business being rather slow. Still may be there by July though.

Wondering what I can snowball next….

Big snowball!

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We got our tax refund last week. Now, we’re pretty savvy and don’t “donate” more to the IRS than we need to. We do take advantage of the adoption tax credit, and deductions for higher-than-average charitable giving. Our tax return was over $10,000, and there’s rollover credit left that we’ll claim next year. Talk about a “snowball.”

With this we paid off two credit cards, made a substantial payment on another and have a little left over for savings.

When I heard this week that many families who adopted from our agency are being turned down for their interest-free revolving loan program due to lack of funds (apparently many families have stopped paying due to hardship) I was sad.

I wrote a check for our balance $2,500 and drove it to the office the same day. Our loan had been $4,500 and we’d been paying back at $150 per month steadily.

This means I’ll be able to snowball the $150 per month in the future towards our remaining credit card debt, and that other families can benefit from the money we had outstanding on the loan. This is how real credit should work in my opinion.

I know I paid off an interest-free loan before an interest-laden credit card, which is rather foolish, but to me on this matter, it’s about principle, not principal.

Just my $.02 for today… or $2,500 as the case may be.

PS! it feels so good to be free of a debt like this that I’m actually thinking of paying off my student loan early too. Just $2,000 left to go on that one.